Quiet Euro Market is Not So Quiet for Some

The European Central Bank's announcement last week that it would hold off on any further rate hikes in the current market led market players to suspect that the Bank of England will follow suit. And while a slowdown on rate hikes is expected to improve consumer sentiment, some players believe the current market crisis could take more than two years to run its course.

On the European ABS front, September continues to be slow overall, and pricing spreads aren't likely to find their grounding for some time. In the middle of a crisis, Europe appears to be looking for some direction. Price declines at these levels, coupled with the drying up of secondary trading, will lead to a complete decoupling of prices from credit fundamentals. "European structured finance paper is currently trading at levels that have no precedent whatsoever, making for a compelling relative-value argument, considering that bonds remain mostly unimpaired, unlike pockets of the U.S. securitized market," Deutsche Bank analysts said.

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